In the Chem Dry franchise agreement, what is the impact of a non-final court ruling on the franchisee's obligation to indemnify CDI?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
FRANCHISEE agrees to indemnify, defend, and hold harmless CDI, its affiliates, and CDI'S and their respective shareholders, directors, officers, employees, agents, successors, and assignees (the "Indemnified Parties") against, and to reimburse any one or more of the Indemnified Parties for, all claims, obligations, and damages directly or indirectly arising out of the BUSINESS'S operation, the business FRANCHISEE conducts under this Agreement or outside the scope of this Agreement using the Marks, or FRANCHISEE's breach of this Agreement, including, without limitation, those alleged to be or found to have been caused by the Indemnified Party's negligence, unless (and then only to the extent that) the claims, obligations, or damages are determined to be caused solely by CDI's gross negligence or willful misconduct in a final, unappealable ruling issued by a court of, or arbitrator with, competent jurisdiction.
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- For purposes of this indemnification, "claims" include all obligations, damages (actual, consequential, punitive or otherwise), and costs that any Indemnified Party reasonably incurs in investigating, defending and resolving any claim against it, including, without limitation, reasonable accountants', arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, interest, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced. Each Indemnified Party may defend any claim against it at FRANCHISEE'S expense and agree to settlements or take any other remedial, corrective, or other actions.
- This indemnity will survive termination or expiration of this Agreement and continue in full force and effect subsequent to and notwithstanding the termination or expiration of this Agreement until the expiration of all statutes of limitation on any claims covered by this indemnity, and for the duration of all defending claims asserted against an Indemnified Party before the expiration of such limitations.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, a franchisee's obligation to indemnify Chem Dry and its affiliates is in effect unless a final, unappealable ruling determines that the claims, obligations, or damages were caused solely by Chem Dry's gross negligence or willful misconduct. This means that even if a court initially finds Chem Dry negligent, the franchisee must still cover the costs until all appeals are exhausted and a final decision is made.
This requirement includes covering all claims, obligations, and damages that arise directly or indirectly from the operation of the Chem Dry business, the franchisee's actions under the agreement, or any breach of the agreement. The definition of "claims" is broad, encompassing all expenses incurred in investigating, defending, and resolving any claim, such as accounting, arbitration, legal, and expert witness fees.
This indemnification clause remains in effect even after the franchise agreement expires or is terminated, lasting until all statutes of limitations on relevant claims have passed. This extended period of responsibility places a long-term obligation on the franchisee to cover potential liabilities, even after they are no longer operating the Chem Dry business. The franchisee is responsible for these costs unless a final, unappealable ruling specifically finds Chem Dry solely responsible for gross negligence or willful misconduct.